Debt, Credit Card & Consolidation Current News Digest

 

Visitors to FreeCreditReport.com will soon see this bold disclosure.

Like the song says, he should have seen it coming at him like an atom bomb.

The singer of those FreeCreditReport.com jingles might sound a bit less peppy now that the Federal Trade Commission is making the company behind the ads — credit bureau Experian — face the music. Heavy-handed disclosures aimed at ending years-long confusion over free credit reports will begin to appear in the ads next month. The changes are among new consumer protections enacted by Congress in the 2009 Credit Card Accountability Responsibility and Disclosure Act.

In one disclosure viewed by msnbc.com, the top of the FreeCreditReport.com Web site was covered with a large grey block with type that read:  "You have the right to a free credit report from AnnualCreditReport.com … the only authorized source under federal law,"  with an obvious link to the site.  Consumers who still want to sign up with FreeCreditReport.com would have to scroll down and enroll in the paid service offered by Experian.

"That's what we were aiming for," said Maneesha Mithal, an FTC attorney. "Congress wanted the disclosure to be really prominent."

Many Web sites, including FreeCreditReport.com, claim to offer free credit reports, but do so only as a come-on for costly credit monitoring subscriptions services. 

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Market leader Experian, which owns the coveted FreeCreditReport.com Web address, began advertising heavily in 2003 after Congress mandated that U.S. consumers were entitled to a free copy of their credit reports every year. The FTC has been in a legal battle with the site ever since. Experian has been forced to issue refunds and pay more than $1 million in fines, but that didn't quiet the crooning of Eric Violette, the star of the FreeCreditReport.com ads.

In what might be a first in consumer protection history, the protracted FTC-Experian legal fight actually included a foray by the government agency into comedy. Last year, the FTC created a spoof ad, poking fun of the FreeCreditReport jingles while trying to warn consumers that they might end up paying for something they could get for free.

Throughout the legal wrangling, the FTC has fielded numerous complaints from consumers who thought they were getting their congressionally authorized free credit report, only to find they had been signed up for a $14.95 monthly subscriptions they didn't want. Msnbc.com has been inundated with complaints too, and has written several stories about the issue, including a 2007 piece titled "Don't fall for FreeCreditReport.com."

It's hard to imagine the new warnings not putting a dent in the confusion – and that could be bad for Experian’s bottom line.

Experian does not break out its FreeCreditReport.com sales, but in advertising for the site the firm claims to have served 20 million consumers. ComScore MediaMetrix says the site is the No. 1 ranked “financial advice” Web site, with 6 million visitors each month.  Experian invested heavily in the market back in 2002, when it acquired FreeCreditReport.com for $130 million.

In anticipation that the gravy train might end, Experian has been spending about $70 million annually on FreeCreditReport.com ads, according to the New York Times.

The new disclosure law applies to any firm that claims to offer a free credit report, Mithal said. Anticipating the next round of regulatory cat-and-mouse, the rule requires the prominent disclosure to appear on every page where the words "free credit report" appear, she said.

Experian and its competitors must begin adding disclosures to their sites immediately, but the precise warning prescribed by the FTC doesn't have to appear until April 1. That's why some visitors to the FreeCreditReport.com are currently seeing much more humble disclosures, with only a single line of text – in a small font and not hyperlinked — atop the page. The firm said it was testing different disclosures.

 

Television ads also will have new warnings: visual and audio disclosures directing viewers to AnnualCreditReport.com.

The Web site warnings were designed by the FTC’s Web design staff, Mithal said, after receiving input from industry members and consumer groups. It's unusual for a government agency to tell a company precisely what to put on its Web site, but Mithal said the FTC has at times forced firms to include new disclosures through court orders or other rule-making procedures. This new disclosure has a bit more legal heft, however, arising from a direct order by Congress.

It's taken a long time — five years — for the FTC to settle on a way to clear up the confusion over free credit reports. What took so long?

"We've been monitoring the marketplace for a long time,” Mithal said. “We have had a lawsuit against (Experian), we've done (court) orders. But at some point Congress said this isn't working. So it's been a process."

Experian, in a statement, said it was playing by the rules and has always done so.

"Experian has been, and will continue to be, in compliance with the FTC's rules regarding the marketing of free credit reports," the firm said in a statement to msnbc.com.  "We remain committed to clearly and conspicuously disclosing to consumers that the free report we offer is not the free annual credit file disclosure provided by federal law, and plan to comply with the FTC's rules by April 1."

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Washington Post

Credit cards' credo: Fees, fees, fees Marketplace (blog) The credit card reforms Congress approved last year take effect today, making it more difficult for card companies to raise interest rates right away. … Credit cards then and now: A look at how the new law changes the rulesLos Angeles Times Rules Change Today for Your Credit CardsOzarks First Law restricts ownership of credit cardsUniversity Daily Kansan NACS Online -Press of Atlantic City -Inland Valley Daily Bulletin all 763 news articles »

At a recent gathering of amateur consumer advocates in New York City, discussion turned to this thorny topic: How do you focus the rage people feel about rip-offs on fixing the problem?  Consumers are quick to anger when a company unjustly charges a $35 late fee, but they seem far more reluctant to get involved as Congress debates legislation that would make the $35 fee illegal. Why? One obvious reason: Congress is slow and the legislative process is confusing.  

So here's a quick scorecard on the debate over creation of the proposed Consumer Financial Protection Agency, which would be the first new federal consumer protection agency since the 1970s.  While the congressional made-for-TV kabuki dance that will decide its fate won't take place for another several weeks, the real end game is happening right now, as Washington, D.C., appears to be slumbering under three feet of snow. So this is a good time to pay attention.

In case you missed the last episode, here's a quick background: Harvard bankruptcy professor Elizabeth Warren proposed a new agency several years ago that would regulate consumer contracts on financial matters like credit cards and mortgages. Warren, now a bit of a cult hero in consumer advocate circles, is currently chair of the oversight panel Congress set up to monitor the TARP bailout. Banks don't like her much, but she's the odds-on favorite to head the new consumer agency should it be signed into law.

During his campaign, President Barack Obama supported the idea of a new consumer protection agency, and he has called for its creation several times in the past year. In December, Rep. Barney Frank, D-Mass., ushered legislation through the House of Representatives — barely — that would create the agency. The Wall Street Reform and Consumer Protection Act passed by a 223-202 vote.

Note that this bill does much more than create a new consumer agency; it includes a full set of financial regulatory reform proposals. But creation of the consumer agency appears to be the most divisive issue.  Supporters say that only an independent agency could act as a worthy adversary to the banking industry. Opponents argue that it's folly to create a single-purpose bank regulator that has no interest in the safety and soundness of the institutions or the overall health of the industry.

Given the tight House vote, debate in the Senate was expected to be difficult,  and so far it has not disappointed.

Retiring Sen. Chris Dodd, D-Conn., is head of the Senate Banking Committee, which now controls the fate of the legislation. Last year, he'd indicated unflinching support for it. But in January, he flinched. Numerous reports indicated his willingness to negotiate away creation of the agency in exchange for other regulatory concessions from Republicans – specifically the senior Republican on the Banking Committee, Sen. Richard Shelby of Alabama.

The news sent consumer groups into a tizzy, with some predicting this meant the death of the Consumer Financial Protection Agency.

But turned out the obituaries were premature.  Last week, Dodd's office announced that he had reached an impasse with Shelby, and that he was abandoning efforts at a compromise. Instead, he said, he would propose legislation that resembled the House bill.

Warren, meanwhile, fresh from preaching to the choir during an appearance on Jon Stewart's “The Daily Show,” penned an impassioned op-ed in the Wall Street Journal reiterating the need for the agency.

“The same Wall Street CEOs who brought the economy to its knees have spent more than a year and hundreds of millions of dollars furiously lobbying Washington to kill the president’s proposal,” she wrote.

On Wednesday, Senate reform talks got a jump start, when Dodd opened negotiations with a different Republican on the Banking Committee, Sen. Bob Corker of Tennessee.  Both made public statements about the renewed talks on Thursday.

"Senator Corker has proved to be a serious thinker and a valuable asset to this committee,” Dodd said in his statement. “For that reason, I called him Tuesday night and asked him to negotiate the financial reform bill with me. We met in my office on Wednesday and given the importance of these issues he agreed. I am more optimistic than I have been in several weeks that we can develop a consensus bill to bring about the reforms the financial sector so desperately needs to prevent another economic crisis."

But does that mean creation of the agency is likely now?  Not at all.  Corker said Friday he is merely picking up where Shelby left off

"Like most Republicans I believe a stand-alone agency for consumer protection or separating those protections from safety and soundness are nonstarters,” he said, according to Reuters. 

What are they taking so long talking about?

There appear to be two issues which have bogged down — and might ultimately kill - the agency.  The first  is independence. The second, a bit more subtle, is an effort to protect the independence of state-level consumer protections.

By now, creation of a completely independent CFPA — something Republicans have compared to the Environmental Protection Agency — seems off the table. Most reports indicate that the agency will survive only if it is part of another regulator. It might be housed in the Treasury Department or be a part of the Federal Reserve, but could retain some independent rule-making authority.  And that's the sticking point.

In October, while there was a flurry of stories concerning the potential watering down of the new agency, Warren spoke to msnbc.com and appeared to draw a line in the sand. At the time, some areas of regulation, such as car loans, were removed from its purview by the House of Representatives. 

"I draw the line at independence," she said. "If the new agency isn't independent, it isn't worth doing."

But this week, a source familiar with the negotiations said consumer groups have warmed to the idea of the agency being housed in the Treasury Department, as long as it has full independence within the department, comparable to the Office of the Comptroller of the Currency, which is also technically part of Treasury.

Balber, from Consumer Watchdog, said the key distinction involves independent rule-making authority,

"It would depend on how something like that is structured," she said.  "The key is that no one would have veto power or some other form of power to weaken the agency's decisions. So a stand-alone agency that's part of Treasury could work," she said. "I don’t think it would work if it were housed within a prudential banking regulator (such the Federal Reserve). They are looking first and foremost at bank profits."

Meanwhile, state officials are worried about an issue that rears its head every time Congress considers consumer protection legislation – pre-emption.  Nationwide firms and industry groups often argue that federal law should trump, or pre-empt, state law, so that they don't have to abide by 51 different sets of rules. For example, a new federal law to require 45-day notice when raising a consumers' interest rate would override an existing state provision that requires a longer warning period. Obviously, state lawmakers and attorneys general have bitter distaste for pre-emption, which reduces their power and ability to regulate.

Because of hang-ups over the independence of the agency, negotiators haven't even begun to deal with the thorny issue of pre-emption yet, according to another source familiar with the talks. That means there are still significant obstacles in its way.

Meanwhile, opponents continue to voice their objections to creation of the agency. The U.S. Chamber of Commerce is leading the public fight, airing commercials that say the agency would hurt small businesses and making its case at the Web site Stopthecfpa.com.

Noted Republican pollster Frank Luntz has even gotten into the act, recently publishing a talking points memo called "The Language of Financial Reform." In it, he advises opponents of the Consumer Financial Protection Agency to paint it with the broad brush of "big government."

"Creating another costly government bureaucracy on top of existing bureaucracy isn’t a solution - it helped cause the problem," he advises, according to the memo obtained by The Huffington Post. He also instructs opponents to appeal to their voters by saying the legislation is full of "lobbyist loopholes" for industries like car dealers and pawn brokers.

There are two other x-factors that might become part of the discussion.  If a large U.S. bank supported creation of the agency, that would make it more palatable to Republicans.  Earlier this month, Bloomberg reported that Bank of America CEO Brian Moynihan has told White House officials that the bank was not "lobbying against the agency." The bank stopped short of supporting it, however.

Meanwhile, it's unclear how much the force of Elizabeth Warren's personality and popularity might be adding to the financial industry's aversion to the agency.  Banks are used to dealing with faceless, nameless bureaucrats.  A popular consumer advocate with a ready-made bully pulpit might be part of the reason they are digging in their heels. 

So the future of the agency, and the legislation, seems entirely up in the air, a moving target — another reason that U.S. consumers might find it difficult to engage in the debate.  Most observers feel that Dodd has the votes he needs to pass even the most liberal version of the bill through the Banking Committee, and that he intends to bring some financial reform bill to a vote on the Senate floor, probably in March. There, it is likely to find the same fate as health reform — it won't have 60 supporters and will die a parliamentary death unless at least some Republicans support it.  A source familiar with the discussions said Rep. Barney Frank wants to force a Senate vote, which would require Republicans opponents to cast a potentially unpopular vote against consumer reforms.  Balber is among many consumer advocates who would like to see issue come to a head.

"We are still concerned that something less than consumer agency will come out of this," she said. "Right now, things are constantly shifting. We are calling on Dodd to make his position clear. … Meaningful financial reform must make the marketplace safer for everyday Americans."

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When you go to do your taxes this year, you will have the option to give three of your tax dollars to the Presidential Election Campaign Fund. $3 isn’t deducted from your refund or added to your tax bill, $3 from your taxes is simply allocated for the fund. The money is used to in the party nominating conventions, presidential primaries, and then the general election every four years. It was created by Congress in the 1970s as a matter of campaign finance reform as candidates who accept financing have to follow certain fundraising and total spending rules. If you remember, it was a big deal when then presumptive Democratic nominee Barack Obama opted out of public financing.

If you want to learn more about it, I may recommend the Federal Election Committee website where you can find all sorts of campaign finance gems.

My question to you is do you check off $3 to the Presidential Election Campaign Fund? When I first started filing my taxes, I didn’t because I erroneously thought it meant I would be personally donating $3. After I learned it wouldn’t actually cost me $3, I thought it was absurd that we would give even more money to spend on political campaigns. However, as I read more, I realized that forcing candidates to take public financing puts a cap on how much they can spend. I don’t claim to be an expert but I think that’s a good thing.

What do you think?

Your Take: Do You Check Off $3 To The Presidential Fund? from personal finance blog Bargaineering.com.

A lot of people are desperate for money right now, and seeking an unsecured personal loan as a solution to the problem. Unfortunately, desperation does not improve your chances of securing a personal loan at a good interest rate and with a manageable repayment schedule.

The most important thing, for people who are feeling desperate for money, is to take a deep breath and then take some time to research the options. Rash decisions can cause loss of money as well as peace of mind, which is something that is priceless.

Compare Personal Lenders Online

One of the best ways to start looking for an unsecured personal loan is to research a few online personal lenders and see what the interest rates and terms are. Many lenders require documents such as paystubs from a job or a copy of a bank account statement, but some online personal lender require very little documentation and may not even do a credit check before issuing a personal loan.

Additionally, the U.S. Congress has instituted restrictions on high interest lenders, so this has put a crimp in the style of credit card companies and other high interest lenders. The online personal lenders that do remain in the marketplace are thus usually pretty respectable outfits.

Beware of Loan Sharks

Speaking of pretty respectable outfits, one group that does not belong to that category is loan sharks. As noted in this article about loan sharks in the U.K., lenders who take advantage of desperate people are doing a lot of business right now.

That is sad. But it can be prevented by thinking carefully before choosing a personal loan. Also, prospective borrowers may want to consider where the funds are going. How badly do you need the funds? For example, are you trying to make rent or just save a car that you can’t afford anyway?

This may seem like a frank statement, but this the type of no-nonsense viewpoint you need to adopt so that desperation does not lead to rash personal loan decisions like going to a loan shark.

Time to Consider Ditching Some Stuff?

Many people are loaded down with bills and feel like they’re drowning. One option is to seriously consider getting rid of some stuff. Turning in the unaffordable car, for example.

Ideally, a personal loan is a bridge to an affordable life, not merely another bill added to the pile.

Arianna Huffington made waves recently when she went on national television calling on  consumers to dump their big banks and deposit all their money into local, community banks.  Huffington's site, HuffingtonPost.com, threw its weight behind a Web site designed to make breaking up with your bank a little easier — MoveYourMoney.info. It includes a ZIP-code based locator to help consumers pick through the thousands of banks in the U.S. It even sports a short, cleverly edited video that juxtaposes the classic film “It's a Wonderful Life” with images from testy congressional hearings about the banking industry.

Driven largely by Huffington's media popularity, the site quickly gained traction. Huffington's appearances on MSNBC's Countdown and CNN's Larry King Live, among many others, had some observers calling MoveYourMoney a movement. One of Huffington's partners in the venture, Dennis Santiago of Institutional Risk Analytics, says visitors have searched for banks in more than 16,000 ZIP codes — better than half the ZIP codes in the country. 

It's far too early to tell if Huffington has done something that might genuinely take a bite out big banks — real data probably won't be available for months.   But Huffington is tapping into frustration that has been building since 2008 banking collapse and bailout, say advocates for credit unions and smaller, community banks.

"It has been developing for the last several months," said Bill Hampel, chief economist of the Credit Union National Association. "Annual growth in credit union members had been very weak for the past several years…but during the first 11 months of 2009, our growth rate doubled." Credit unions added 2 million new consumers  during that stretch, Hampel said.

Karen Tyson, spokeswoman for the Independent Community Bankers Association, said her 5,000 member banks were experiencing similar, frustration-driven growth.

"Community banks have, since the onset of the financial crisis, gained new customers," she said.   

The American banking system appears to provide seemingly endless alternatives.There are 8,000 banks and 7,600 federally insured credit unions, according to the American Bankers Association.

"The good news is people have choice," said Nessa Feddis, spokeswoman for the American Bankers Association.  "There's lots of competition, and if people are dissatisfied they should look around and vote with their feet."

But most don't.  A tiny group of large banks dominate.  In 2009, four banks — Citigroup, JPMorgan Chase, Bank of America and Wells Fargo — held 39 percent of all deposits in FDIC-insured banks, according to Reuters. 

The high concentration of account-holders — combined with a low concentration of good will – certainly seems create the potential for a mass exodus. So why the need for a Huffington Post-prompted movement?

It turns out the breaking up with your bank is hard to do. 

In 2008, the Federal Reserve published a study around what economists call "switching costs" — the pain and suffering consumers must face when trying to leave one bank to join another.  The results were disturbing.  The study, by Fed senior economist Timothy Hannan, found it was incredibly difficult for consumers to get reliable information about the true costs of the new bank, for example, and described what a "bargains-then-rip-off" strategy to reel in customers and then exploit them. 

The euphemistic  name for the strategy is a “two-period” model. )  Period one is a free toaster.  Period two is cascading overdraft fees.

Even worse, the true costs and fees levied on account holders may not even be available to consumers until they've committed to the new bank. In many cases, fee schedules aren’t listed on generic Web sites and  can only be viewed by account holders after they’ve logged in – so there is literally no way to comparison shop.

“There may be some lack of transparency with regard to pricing,"acknowledged American Bankers Association chief economist Keith Leggett.

The switching costs become apparent when trying to extract your old bank's tentacles from your new financial life.  Today, most consumers use their checking account for a dozen different activities — direct deposit of payroll checks, automated online bill payment of mortgages and auto loans, recurring debit card transactions, automatic savings plan deductions, credit card bill payment and so on.  Ending all these transactions, and starting the payments anew, is such a hassle that "inertia" often takes over, says Hampel.

"Changing where you have your checking account can be a royal pain in the neck," he said. "It's like if you lose a credit card and have to inform all those people you have a new one, only much worse than that."

To combat the switching cost problem, many credit unions have developed "switch kits" to grease the skids, including forms that help new consumers track the changes needed for all payments and deposits. Those may ease the pain a little, but ultimately getting a new bank means fighting through a lot of red tape.

Still, consumers should look past the hassle and find a bank or lending institution that suits their needs, says Leggett.

"Who you do banking with is very important.  It may be the most important financial relationship of your life, so you should do your homework," he said. 

Leggett welcomed the discussion about switching to smaller banks and credit unions started by the Huffington Post, but he cautioned consumers against a "knee-jerk" reaction to it.

"In not every case is a credit union better than a bank with regard to pricing or fee structure," he said, saying that credit unions have also been guilty of charging annoying fees, just like big banks. "People have to realize when looking for a financial provider that they should always shop around and find a provider who offers the appropriate level of convenience.

Smaller banks and credit unions, he warned, will not provide the same "product mix" as larger banks, and are less likely to offer benefits for using multiple products – such as free checks or discounted loans.

But credit unions provide obvious benefits – in the form of better interest rates, both on loans and deposits, said Hampel.  According to Datatrac Corp., average credit union credit card rates are currently more than one full interest point lower, car loans are 1.5 percent lower, and one–year CD rates are 0.30 percent higher.  (Banks currently enjoy a small edge over credit unions in mortgage rates.)

Meanwhile, community banks offer something big banks find nearly impossible to compete with — local ownership and the ability to talk with a familiar face in the event of unexpected financial hardship, said Tyson of the community bankers group.

“They always put customer service first, and doing right by the community first.  They will not give you a

loan purely to make a profit. And you’re not going to be just a number,” she said. “You’ll be able to walk in the door and you can find the bank president, and know that he lives in your community. … It's a different sort of a custoimer relationship.”

Like Huffington, Tyson sees the switching issue in a larger context.  Federal law provides for a nationwide "concentration cap" of 10 percent, meaning no one bank can control more than 10 percent of the U.S. deposit market. 

Because of the banking collapse and resulting consolidation – leaving four banks with nearly 40 percent of deposits —  the cap is currently being threatened, leaving the U.S. financial system concentrated in too few hands, Tyson said. Through its "Fix Too Big to Fail" marketing campaign, the community bankers group  is lobbying Congress to lower the cap and force large banks to divest some of their holdings.

"The only way to change the dynamic is to have legislation in place that makes it not as appealing to be … large institutions," she said.

RED TAPE WRESTLING TIPS
Marketing campaign and blog-initiated movement aside, it’s always a good idea to review your financial relationships and see if you can get a better deal.  Consumers interested in investigating a move away from big banks should know it takes a bit of work, but there’s plenty of help available online, and one or two lunch hours should do the trick. Here are some tips:

* Rates aren't everything, and people matter. Leggett points out that many consumers are far too concerned with the published interest rate they'll earn on savings and checking accounts, and sometimes pick banks based on small differences.  Given that current rates are so low, earned interest should be of little concern at the moment; fee schedules are more significant. But even more important is the likelihood that the bank will treat you like a human being should anything go wrong; if, for example, you accidentally overdraw your account and land a series of overdraft fees.  Will a familiar teller help you, or will you end up stuck on a long voice mail tree?  We all make mistakes. It’s hard to put a price tag on the reassurance that you’ll be treated like a person, and not a criminal, when your turn comes.

* Don't forget the middle child. Feddis points out that there is middle ground between the four huge banks and thousands of small banks — what she calls "medium-sized" institutions.  They might offer the best of both worlds.

* Beat the feared late fee:  The real fear over switching comes from the potential for a missed loan or credit card payment, or double payments that could lead to an overdraft. There are several ways to ease the transition between institutions, although all of them involve a little extra money.

The easiest thing to do is double up. Keep both accounts open and keep all your payments turned on until you can confirm that new payments have been received by the old payee.  This will require having a lot of extra money to spare. A variation involves paying with your new account a full 10 days earlier, giving you time to cancel scheduled payments from your old account. You'll still need the extra money in case a payment lands in limbo. In either case, it's good to set up overdraft protection on both accounts by linking the checking account to a credit card, savings account or line of credit, so there's backup if you screw up.

The simplest – but most time-consuming — method is to open the new account without closing the old one, and then switching one bill payment one month at a time to the new account, making sure each one is set up properly before switching the next one.

*If your credit card issuer has cut you off: Many consumers find they are losing available credit on their cards or losing their cards altogether.  This hurts their credit score.  Hampel said consumers thus spurned should still apply to a credit union for a new card and will likely get the account as long as their credit isn't severely damaged. Expect a lower credit limit than you're used to, however — credit unions are much more stingy about credit card maximums.  That's a good thing, Leggett says:  that's partly why the bank credit credit card default rate  is currently around 10 percent, while credit union rates are down near 2.5 percent.

*Finding an alternative. While credit unions have certain limitations on membership, Leggett says that virtually all U.S. adults are eligible to join at least a few credit unions.  If you're stumped, try the credit union locator at

http://icba.org/consumer/BankLocator.cfm?sn.ItemNumber=51757

To find a small bank, try the bank locator

http://icba.org/consumer/BankLocator.cfm?sn.ItemNumber=51757

or use the Huffington Post tool, which lists only banks graded B or higher on Institutional Risk Analytics’  scale.

——————-

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What Congress giveth, credit card companies are poised to take away.

In six weeks, the final major provisions of the Credit Card Accountability, Responsibility and Disclosure (CARD) Act will take effect.  The law prohibits many egregious tactics used by card issuers, such as retroactively raising interest rates on consumers' balances.  But issuers have reacted to the sweeping new consumer protection law by quickly inventing new egregious tactics, including raising rates and lowering credit limits on half of all U.S. cardholders. 

And that may just be the beginning. Bill Hardekopf of Lowcards.com expects a series of new “gotchas” from card issuers in the year ahead, as they struggle to recover revenue lost to the CARD Act or the economic downturn.  Here are six new booby traps consumers should watch for this year.

1) More cards with annual fees

Today, only about 20 percent of credit cards come with annual fees, Hardekopf said, and consumers with good credit can easily avoid them. That will be less true this coming year. Already, Bank of America is surprising some existing customers by adding fees ranging from $29 to $99.  

Annual fees need not be so obvious, however.  Citibank is demanding $2,400 minimum annual spending from some customers — otherwise, they face a $35 fee.

It's important to carefully watch your bill to see if an annual fee has been added, Hardekopf warns. Otherwise, you might pay the fee unknowingly.

Despite the expected onslaught of annual fees, Hardekopf says consumers should still be able to find annual fee-free cards. 

"I believe the credit card industry is competitive enough to where there will be an issuer or issuers who will offer free cards," he said.

Consumers who are tagged with a new fee should seriously consider dumping the card and getting a new one. That should be done with care, however. Never close the old card without receiving a new one first, because closing the card will hurt your credit score and could prevent you from getting a new one.  Even closing it later will hurt your score, but probably not enough to exceed an unwanted $99 annual fee.

2) Fixed-rate cards changed to variable rates

It will be harder for banks to raise consumers' credit card rates once Feb. 22 rolls around. There is one loophole: Variable rates will still float up and down in line with the Prime Rate. Since bank rates have nowhere to go but up, variable rate card rates will definitely be going up.  Watch the mail for notice that your fixed-rate card is no longer fixed. If you don't like the change, consider switching to a new card – but follow the advice above.

3) Increases in interest rates

Many existing cardholders have already endured rate hikes; now, it's time for new cardholders to get hit. The CARD Act has no limits on the rates that consumers can be charged when applying for new credit cards.  Unable to raise rates on current customers, banks will target new customers with higher prices.  Why is this important? Consumers who feel jilted will be shopping around, and may not find options as many attractive alternatives as in the past.

4) Increases in existing fees

The CARD Act eliminated some fees, such as over-limit fees, but it did nothing to cap other fees. The best example so far: balance transfers between cards have typically been 3 percent for some time.  Last year, Bank of America hiked the fee to 4 percent and recently JP Morgan Chase raised its to 5 percent. Cash advance fees will likely follow suit, and late fees probably won't be far behind.

5) New fees

This is the most alarming area of all.

"Overall, I think fees is the big word for 2010," Hardekopf said. "There are people dreaming up fees right now that you and I have never heard of."

Card companies are taking tips from other industries in their fee-invention schemes, he said.  Some issuers are charging $1 a month for paper bills (imitating the cell phone industry). Fifth Third Bancorp recently added a $19 inactivity fee for customers who don't use their cards during a year. (Stockbrokers were the trail blazers on that one.

"Since fees represent such a cash cow for issuers, expect aggressive increases in existing fees as well as some brand new fees on your credit cards," he said.

6) Futzing with rewards

Decreasing the value of rewards points might not sound as harsh as a penalty fee, but it is.  Card issuers have myriad ways they can toy with rewards values, and many have begun doing so in earnest. Many miles cards now require more points for travel; some have added "tiers" that make travel more expensive, effectively devaluing the points. Other cuts are more obvious: Cash reward cards that lower their percentage rebate, for example. One of Hardekopf's personal cards now rebates only 1.25 percent of all purchases, down from 1.5 percent.

"I'm an avid user of credit cards. I put everything on my card just so we can get the cash back," he said. "This decrease in rewards is costing us money and I'm irritated."

Better or worse?

While the CARD Act contains many positive consumer protections, it's open for debate whether consumers will be better off after it takes effect than they were before, given the reaction by banks.  Hardekopf thinks there's not much room for debate.

"I think consumers are worse off than they were before," he said.  "Taken with what the issuers have done in response to the CARD ACT, I do think it has hurt more people than it helped."

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Will Congress Take Another Swipe at Credit Cards? Wall Street Journal Fresh off of its enactment this summer of new regulations on consumer credit card terms, some in Congress want to go further—to impose a …

Who caused the housing crisis? That seems to be the question of the week as Congressman, Fed Chairman Ben Bernanke, and The New York Times weigh in on the matter with sharp words all around.

The question behind that question, for homeowners looking to refinance, is:

How will the results of the housing crisis blame game affect refinancing possibilities in 2010 and beyond?

Congress Says Low Interest Rate Policy of Fed “Abysmal Failure”

Senator Christopher Dodd of Connecticut made news the other day when he referred to the low interest rate policies of the Federal Reserve as an “abysmal failure.” This strong phrase was uttered as a direct rebuke to the Chairman of the Federal Reserve, Ben Bernanke, who is up before Congress for re-confirmation to his post and facing some pretty serious grilling.

Throughout the first decade of the 21st century, the Federal Reserve pursued a monetary policy that has led to persistently low mortgage rates. Now, we may be in a situation where the entire housing market is actually dependent upon low mortgage rates.

Bernanke Strikes Back, Arguing That Congress Failed to Regulate

Bernanke offered the counter-argument that it is not the low mortgage rate policies of the Federal Reserve that are primarily to blame for the mortgage meltdown, but the lack of regulation by Congress of problematic mortgage products.

Bernanke pointed to recent consumer finance protection legislation as an example of what effective mortgage regulation could have looked like. The new consumer finance protection legislation is aimed to prevent credit card companies from continuing to help unwise consumers stay in debt for life.

Bernanke implied in his testimony that some similar effort to rein in “predatory lending” in the mortgage industry would have been the best medicine for preventing the housing crisis.

New York Times Article Calls Modification Policy a Failure

The so-called “Gray Lady” has historically been quite friendly to liberal causes, but a recent article about problems with federal loan modification programs does not conform to that pattern. In fact, the article includes extensive talk about the government help actually hurting the housing market.

The best statistic in the article: of 759,000 “trial” loan modifications, only some 31,000 have been finalized. Meanwhile, foreclosures are expected to be more plentiful in 2010 than they were in 2009.

What All This Means to Homeowners Looking to Refinance

The blame game may seem far removed from the concerns of the average homeowner who is looking to refinance. But it’s not.

If blame leads to new mortgage regulations, every mortgage holder may feel the effects.

On December 22, the Mortgage Bankers Association submitted a 50 page letter to the Federal Reserve Board of Governors. The intent of this letter is to address certain law changes to mortgage paperwork that are being pondered by the U.S. Congress as a part of consumer finance reform.

While admitting that the fact that many people take their mortgage paperwork, sign wherever they’re told to sign, and don’t understand a word of it is a problem, the MBA does take issue with several of the proposed changes.

For refinance borrowers, here are three major points contained in the letter:

1. No Limit Broker Compensation

Mortgage brokers have been vilified in the press over the past two years for overcharging borrowers and not disclosing true loan costs. The “yield spread premium” method, by which the lending bank gives the mortgage broker an extra fee for putting a borrower into a certain loan, has been widely criticized as a hidden fee that most refinance borrowers are not aware of.

In light of these problems, several lawmakers have proposed limiting compensation available to mortgage brokers to a set fee of some sort. The MBA, in its letter, srongly opposes such limits, arguing that such a law would only lead to more lawsuits and thus more cost for home loans in the future.

2. Easy to Understand Home Loan Summaries

The MBA is supporting the effort by legislators to demand that mortgages be described to consumers with at least some small degree of clarity. In many ways, the Mortgage Bankers Association has been leading the drive to clarify and simplify mortgage lending.

Mostly, clarity would show itself in requirements of new, drastically simplified mortgage “summary” paperwork. For example, home loan applicants might be given a “Key Questions to Ask About Your Mortgage” page, as well as a “Fixed vs. Adjustable Rate Mortgage” comparison page.

Simple documents like these could do a lot to protect unsavvy mortgage applicants.

3. Slow Down Please

On a general note, the letter from MBA begs for time to read any new bill authored by Congress. Typically, the new consumer protection bill is incredibly lengthy and difficult to read.

Ironically, Congress may be committing the exact same crime attributed to mortgage lenders: refusing to put law into language that the average human being can at least halfway comprehend.

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